'They turned a blind eye to it,' says Eby on release of damning German report into money laundering at B.C. casinos

The B.C. government has pledged sweeping oversight reforms of the casino industry as recommended by a damning independent report on money laundering released Wednesday.

The report by Peter German, a former deputy commissioner of the RCMP, found there was a collective system failure that grew over time and outstripped the ability of existing legislation, processes and structures to effectively manage it.

For many years, certain Lower Mainland casinos unwittingly served as “laundromats” for the proceeds of organized crime, German’s 247-page report found.

German concluded that money laundered through casinos was linked, at least in some cases, to domestic and international organized crime organizations involved in illicit drug and precursor chemical purchases, drug importing, distribution and trafficking.

German also found that some of those that arranged money laundering were buying real estate and advising others how to conduct real estate transactions.

At an event Wednesday to release the report, Eby said money laundering in casinos was linked to the opioid crisis that has claimed thousands of lives and to escalating housing prices that have made life unaffordable for British Columbians.

“There is little that is obvious about the nefarious tactics about money laundering. However, I believe the only way to combat money laundering is to tackle it full on, bring the public along in full view so they understand the work and consequences of failing to take action, as well as the costs of taking action,” said Eby.

B.C. Attorney General David Eby at a news conference to discuss an independent review of anti-money laundering practices, in Vancouver, BC. June 27, 2018.Nick Procaylo /
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The review by German, who is also a lawyer and author of the definitive textbook Proceeds of Crime and Money Laundering, was not intended to be a fault-finding exercise.

Asked whether senior executives such as the B.C. Lotteries Corp. CEO should be held accountable for not doing more to prevent money laundering, Eby said he puts responsibility on the former B.C. Liberal government.

German recommended creating an independent regulator of the casino industry similar to the Alcohol and Gaming Commission of Ontario, and a specialized police force dedicated to gambling that has a 24/7 presence at casinos.

The current regulator, the gaming policy and enforcement branch, is within the Minister of Finance and is restricted in what it can do on money laundering. It has no power over the B.C. Lotteries Corp., which has responsibility for casinos. BCLC, to some extent, also acts as a regulator and that is not an ideal situation, said German.

The recommendations would also put more responsibility on casino operators, recommending they report directly on suspicious transactions to the federal Financial and Transaction Reports Analysis Centre (better known as Fintrac) rather than to the B.C. Lotteries Corp.

German also recommends putting more authority and responsibility for casinos to know their gamblers.

The B.C. government said Wednesday it has already adopted nine of German’s 48 recommendations. Those include requiring casino patrons show the source of cash and cash equivalents of $10,000 or more and putting regulators in large casinos in the Lower Mainland around the clock.

The B.C. Gaming Industry Association also welcomed the German report on Wednesday and said it will commit to an “efficient implementation” of the recommendations.

“We have always taken seriously our responsibility to report any and all suspicious activities at our properties to BCLC and regulators. We will continue to play a key role in fighting any illegal activity,” said executive director Peter Goudron.

Goudron called the recommendations “sensible measures” to prevent money laundering in casinos.

German issued two interim recommendations in December. One requires casinos to make people who deposit more than $10,000 in cash or bearer bonds to provide identification and the source of the funds, and reject the money after two consecutive transactions unless it can be proven that it does not come from suspicious or illegal activity. The second recommendation called for more government inspectors to be available 24/7 at busy Lower Mainland casinos to help inspect suspicious transactions.

Peter German, former deputy commissioner of the RCMP, speaks about his review of anti-money laundering practices in the province, during a news conference in Vancouver, on Wednesday June 27, 2018.DARRYL DYCK /
THE CANADIAN PRESS

The B.C. NDP government says it identified another 15 recommendations that can be implemented in the short to medium term, including changes to reporting processes.

An internal committee of deputy ministers will be working with German on implementation and policy related work. That group will study that the more complex recommendations as they affect an array of ministries and jurisdictions. The government will move as quickly as possible to implement them, said Eby.

The B.C. government launched the German review in September 2017 over concerns about Chinese high-roller VIPs purchasing gambling chips with massive wads of cash that could be “proceeds of crime.”

The concerns were outlined in a confidential report commissioned by the B.C. Lotteries Corp. from auditor MNP LLP that found that $13.5 million in $20 bills had being accepted in the River Rock Casino in July 2015.

German said he estimates that in excess of $100 million was laundered in casinos, but acknowledged that figure could be greater.

Documents obtained as part of Postmedia’s freedom of information requests show that $650 million in suspicious transactions flowed through B.C. casinos between 2010 and 2016, two-thirds of it in $20 bills.

It would take forensic accounting to track all the money laundered, noted German.

He stressed the recommendations are forward looking, meant to ensure casinos are not again used to launder money.

“In my opinion partial implementation of the recommendations would be a mistake. There cannot be a weak link or history will repeat itself,” said German.

During the peak, in July 2015, $20 million in suspicious transactions flowed through casinos. In February, suspicious transactions were pegged at just $200,000.

However, German told journalists the challenge now that organized crime is giving casinos a wide berth is to determine where drug money is currently being laundered.

That’s why it is important to lobby the federal government on rule changes that will require reporting of suspicious transactions on luxury goods such as cars and boats and also why the province should license money service companies.

On Wednesday, Eby reiterated his oft-repeated position the B.C. Liberal government ignored the money laundering problem in casinos for far too long.

The NDP came to power last summer after 16 years of B.C. Liberal rule.

However, Richmond-Queensborough Liberal MLA Jas Johal said Eby was sensationalizing the report’s findings. The Liberals took steps that stemmed suspicious transactions as much as 60 per cent from their peak in 2015, said Johal.

Any government would say they could have done more, but now it’s time to focus on implementing the recommendations, said Johal.

In response to questions on why casinos didn’t say no to bags of $20 bills wrapped in rubber bands, B.C. Gaming Industry Association executive director Peter Goudron said they followed the rules by reporting suspicious transactions.

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